The document discusses the use of non-executive directors (NEDs) in UK infrastructure companies. It notes that while NEDs are common in listed companies, infrastructure projects are typically delivered through special purpose companies (SPCs) that tend to only have directors nominated by equity parties. However, these directors may not provide truly independent oversight due to potential conflicts of interests. The document argues that appointing independent NEDs to SPC boards could help improve governance and risk management, and that their costs are relatively small compared to the risks of project underperformance.
Investing in Infrastructure: One way bet or booby trap?Nigel Brindley
As investor appetite for infrastructure assets grow, increasing risks threaten to undermine returns. Are the asset management skills available to preserve investment returns? This paper explores the evolving skill requirements required to secure returns from infrastructure as it enters a new cycle.
The New Hedge Fund-Prime Broker RelationshipBroadridge
The financial crisis has changed the relationship between hedge funds and prime brokers. With the default of some leading providers, funds have realized that they should diversify their prime broker relationships and require more transparency on operational processes of prime providers. However, as the funds industry regains momentum, they are looking to their prime brokers to provide services that will support business expansion. Hence, prime brokers need to adapt their offering and IT infrastructure to respond to the changing market.
Legal framework for hedge fund regulationmydeal514
Certified Legal Funding (CLF) provides accident victims with low cost cash advances and pre-settlement accident lawsuit funding while awaiting pending litigation or negotiations as a result of auto accidents or other personal injury cases.
For decades, hedge fund managers have supplied investors and regulators with information measuring Assets Under Management (AUM) painting a clear picture of net investor capital at risk. RAUM is a new and separate measurement developed by the SEC. It is not intended to replace AUM and does not illustrate net investor capital at risk. The Commodity Futures Trading Commission (CFTC) does not use RAUM, rather, it relies upon the traditional calculation which is consistent with U.S. GAAP. RAUM will represent a manager’s gross assets under management, rather than net assets under management, and it will be available through managers’ public filings on Form ADV beginning in March 2012.
Distressed Debt Investing: Resources to Help Investors Better Understand The...ManagedFunds
"Distressed Debt Investing: Resources to Help Investors Better Understand Their Investment Options in this Asset Class" is aimed at helping investors better understand their investment options in the distressed debt space. The presentation gives an overview of distressed debt investment and the role these investors play in the bankruptcy process by creating liquidity in the credit markets, lowering the cost of lending, and helping companies that may be close to bankruptcy or in bankruptcy with additional capital.
Investing in Infrastructure: One way bet or booby trap?Nigel Brindley
As investor appetite for infrastructure assets grow, increasing risks threaten to undermine returns. Are the asset management skills available to preserve investment returns? This paper explores the evolving skill requirements required to secure returns from infrastructure as it enters a new cycle.
The New Hedge Fund-Prime Broker RelationshipBroadridge
The financial crisis has changed the relationship between hedge funds and prime brokers. With the default of some leading providers, funds have realized that they should diversify their prime broker relationships and require more transparency on operational processes of prime providers. However, as the funds industry regains momentum, they are looking to their prime brokers to provide services that will support business expansion. Hence, prime brokers need to adapt their offering and IT infrastructure to respond to the changing market.
Legal framework for hedge fund regulationmydeal514
Certified Legal Funding (CLF) provides accident victims with low cost cash advances and pre-settlement accident lawsuit funding while awaiting pending litigation or negotiations as a result of auto accidents or other personal injury cases.
For decades, hedge fund managers have supplied investors and regulators with information measuring Assets Under Management (AUM) painting a clear picture of net investor capital at risk. RAUM is a new and separate measurement developed by the SEC. It is not intended to replace AUM and does not illustrate net investor capital at risk. The Commodity Futures Trading Commission (CFTC) does not use RAUM, rather, it relies upon the traditional calculation which is consistent with U.S. GAAP. RAUM will represent a manager’s gross assets under management, rather than net assets under management, and it will be available through managers’ public filings on Form ADV beginning in March 2012.
Distressed Debt Investing: Resources to Help Investors Better Understand The...ManagedFunds
"Distressed Debt Investing: Resources to Help Investors Better Understand Their Investment Options in this Asset Class" is aimed at helping investors better understand their investment options in the distressed debt space. The presentation gives an overview of distressed debt investment and the role these investors play in the bankruptcy process by creating liquidity in the credit markets, lowering the cost of lending, and helping companies that may be close to bankruptcy or in bankruptcy with additional capital.
MFA's new educational presentation explains the fees associated with hedge funds and how they are used by hedge fund managers. Generally, hedge fund structures incur management fees and performance fees. Other terms explored in the presentation include high-water marks and hurdle rates. Of course, all hedge fund fees charged to any particular investor are based on contractual terms agreed to by the fund manager and the investor. While there is no such thing as a “standard” fee, there are a number of general terms that apply to hedge fund fees.
MSME Financing - Alternative Financing Instruments - Part - 14Resurgent India
Asset-based finance, which includes asset-based lending, factoring, purchase-order finance, warehouse receipts and leasing, differs from traditional debt finance, as a firm obtains funding based on the value of specific assets, rather than on its own credit standing. Working capital and term loans are thus secured by assets such as trade accounts receivable, inventory, machinery, equipment and real estate.
Growth 2020 Slideshow: The Changing Chemistry Between Hedge Funds and InvestorsFIS
Hedge funds provide investors with strong portfolio diversification while maximizing returns and minimizing risk. Yet the drivers for specific demographics to invest are more complex; funds will have to be flexible in their investment styles to capture a broad range of client capital.
In our latest research, we explore the optimal approach to handle changing client expectations for fund managers, through enhanced technology capabilities across small, medium and large funds.
View the slideshow to learn more.
I rarely have a conversation these days where the topic of financing doesn’t arise as a serious concern for my clients. When the economy is robust, and the
capital markets are frothy, financing a commercial real estate transaction is a relatively simple matter. However during today’s recessionary times, the
commercial capital markets are severely constrained. Not only is the supply of capital tight, but the demand may be near all time highs as well. Depending on which industry source you quote there is between $150 and $200 billion dollars of CMBS debt maturing in...
Managing Defined Contribution Plan Investments: A Fiduciary HandbookCallan
Employee Retirement Income Security Act (ERISA) fiduciaries face a challenging task: They must familiarize themselves with ERISA's complicated rules of fiduciary conduct. They must understand and evaluate the performance of plan investments, and in doing so, they are subject to ERISA's prudent expert and exclusive purpose standards. In this handbook we focus on defined contribution (DC) plan investment fiduciaries and some of the key issues they face.
Measuring Hedge Fund Performance: Investors Weigh In InfographicManagedFunds
Investors in hedge funds look to those allocations to fulfill a number of objectives for their portfolios, according to new data from Preqin. MFA used those data to illustrate a number of important points on how investors measure hedge fund performance in a new infographic.
Check-the-box due diligence is not enough - Financial TimesLisa Krow
On-site visits with management are essential. During such trips Jonathan Kanterman, a hedge fund consultant and co-author of FTfm’s hedge fund surveys, has discovered gaps between what he read in fund documents and what he saw involving staffing, technology and investment process, as well as management spending time running other businesses.
Risk Factors as Building Blocks for Portfolio DiversificationCallan
Author: Eugene Podkaminer
Asset classes can be broken down into building blocks, or factors, that explain the majority of the assets’ risk and return characteristics. A factor-based investment approach enables the investor theoretically to remix the factors into portfolios that are better diversified and more efficient than traditional portfolios.
Seemingly diverse asset classes can have unexpectedly high correlations—a result of the significant overlap in their underlying common risk factor exposures. These high correlations caused many portfolios to exhibit poor diversification in the recent market downturn, and investors can use risk factors to view their portfolios and assess risk.
Although constructing ex ante optimized portfolios using risk factor inputs is possible, there are significant challenges to overcome, including the need for active, frequent rebalancing; creation of forward-looking assumptions; and the use of derivatives and short positions. However, key elements of factor-based methodologies can be integrated in multiple ways into traditional asset allocation structures to enhance portfolio construction, illuminate sources of risk, and inform manager structure.
MFA's new educational presentation explains the fees associated with hedge funds and how they are used by hedge fund managers. Generally, hedge fund structures incur management fees and performance fees. Other terms explored in the presentation include high-water marks and hurdle rates. Of course, all hedge fund fees charged to any particular investor are based on contractual terms agreed to by the fund manager and the investor. While there is no such thing as a “standard” fee, there are a number of general terms that apply to hedge fund fees.
MSME Financing - Alternative Financing Instruments - Part - 14Resurgent India
Asset-based finance, which includes asset-based lending, factoring, purchase-order finance, warehouse receipts and leasing, differs from traditional debt finance, as a firm obtains funding based on the value of specific assets, rather than on its own credit standing. Working capital and term loans are thus secured by assets such as trade accounts receivable, inventory, machinery, equipment and real estate.
Growth 2020 Slideshow: The Changing Chemistry Between Hedge Funds and InvestorsFIS
Hedge funds provide investors with strong portfolio diversification while maximizing returns and minimizing risk. Yet the drivers for specific demographics to invest are more complex; funds will have to be flexible in their investment styles to capture a broad range of client capital.
In our latest research, we explore the optimal approach to handle changing client expectations for fund managers, through enhanced technology capabilities across small, medium and large funds.
View the slideshow to learn more.
I rarely have a conversation these days where the topic of financing doesn’t arise as a serious concern for my clients. When the economy is robust, and the
capital markets are frothy, financing a commercial real estate transaction is a relatively simple matter. However during today’s recessionary times, the
commercial capital markets are severely constrained. Not only is the supply of capital tight, but the demand may be near all time highs as well. Depending on which industry source you quote there is between $150 and $200 billion dollars of CMBS debt maturing in...
Managing Defined Contribution Plan Investments: A Fiduciary HandbookCallan
Employee Retirement Income Security Act (ERISA) fiduciaries face a challenging task: They must familiarize themselves with ERISA's complicated rules of fiduciary conduct. They must understand and evaluate the performance of plan investments, and in doing so, they are subject to ERISA's prudent expert and exclusive purpose standards. In this handbook we focus on defined contribution (DC) plan investment fiduciaries and some of the key issues they face.
Measuring Hedge Fund Performance: Investors Weigh In InfographicManagedFunds
Investors in hedge funds look to those allocations to fulfill a number of objectives for their portfolios, according to new data from Preqin. MFA used those data to illustrate a number of important points on how investors measure hedge fund performance in a new infographic.
Check-the-box due diligence is not enough - Financial TimesLisa Krow
On-site visits with management are essential. During such trips Jonathan Kanterman, a hedge fund consultant and co-author of FTfm’s hedge fund surveys, has discovered gaps between what he read in fund documents and what he saw involving staffing, technology and investment process, as well as management spending time running other businesses.
Risk Factors as Building Blocks for Portfolio DiversificationCallan
Author: Eugene Podkaminer
Asset classes can be broken down into building blocks, or factors, that explain the majority of the assets’ risk and return characteristics. A factor-based investment approach enables the investor theoretically to remix the factors into portfolios that are better diversified and more efficient than traditional portfolios.
Seemingly diverse asset classes can have unexpectedly high correlations—a result of the significant overlap in their underlying common risk factor exposures. These high correlations caused many portfolios to exhibit poor diversification in the recent market downturn, and investors can use risk factors to view their portfolios and assess risk.
Although constructing ex ante optimized portfolios using risk factor inputs is possible, there are significant challenges to overcome, including the need for active, frequent rebalancing; creation of forward-looking assumptions; and the use of derivatives and short positions. However, key elements of factor-based methodologies can be integrated in multiple ways into traditional asset allocation structures to enhance portfolio construction, illuminate sources of risk, and inform manager structure.
Corporate Structuring and Fundraising for Single Purpose VehiclesRiveles Wahab LLP
What do securities syndications and fundraising for real estate, restaurant ventures, film ventures, theme parks and a variety other project finance opportunities have in common?
The answer is simply the often overlooked and misunderstood “SPV.” Essentially, the SPV or “Single Purpose Vehicle” is an entity that is structured to take in investor monies towards funding a singular dedicated project or opportunity. Indeed, a great majority of real estate finance projects, and a variety of other project finance opportunities essential to the U.S. economy, are at least partly funded by SPVs. Furthermore, with the advent of crowdfunding and “general solicitation” under the JOBS Act, the SPV’s role in financing a variety of projects and operating companies cannot be overstated.
The Outsourced Chief Investment Officer Model: One Size Does Not Fit AllCallan
As investors reach for returns in a sometimes bruising market, they are adding private equity, hedge funds,
and other alternatives, leading to increasingly sophisticated—and complicated—portfolio monitoring and
management. Heightened regulatory and compliance requirements have further increased the time and
resources required to meet fiduciary responsibilities. This has led some investors to consider delegating
investment oversight, monitoring, and management duties.
The industry press regularly reports on a large and rapidly growing outsourced chief investment officer
(OCIO) market, and some fund sponsors wonder if this model would serve them better than the traditional consulting model. Funds managed through an OCIO are beholden to the same challenging market environment and regulatory atmosphere, but the burden of balancing these challenges can be largely shifted from the investment committee to the OCIO provider. Some funds find this solution meets their needs.
In the outsourced chief investment officer (OCIO) model (also known as “implemented consulting,”
“discretionary consulting,” or “delegated consulting”), an institution shifts discretionary authority to an
advisory firm to manage some or all of the investment functions typically performed by the investment committee. The precise definition of this model varies as much as the name, making the size and scope of the marketplace difficult to pin down.
The increasing popularity of this model is in part a response to the frustration investment committees
have felt amid a shifting environment in which portfolio management requires more resources. While an OCIO offers an elegant solution, it is not a panacea for all the issues facing institutional investors, and relinquishing all fiduciary oversight is not an option.
In this paper we describe the OCIO market and Callan’s approach, which acknowledges that each investor faces unique challenges that require custom solutions. We offer two case studies and a series of questions that might assist fund sponsors in weighing the appropriateness of the OCIO model for their fund.
Quatre Managed Legacy Funds Solution – Quatre Guernsey Limited Nicholas Newman
London-based financial services company Quatre Ltd, has just launched a new solution known as the QUATRE MANAGED LEGACY FUNDS SOLUTION.
It is designed to fund the decommissioning of oil and gas fields and rehabilitation of other extractive industrial locations including mines. Quatre Limited was founded in 2013 to provide oil and gas licensees and other extractive industries with sustainable decommissioning management solutions to optimise their long-term financial planning.
Quatre’s Exit Strategy Management Solution (ESMS) evaluates Clients’ portfolio-specific exposure to the cost decommissioning of onshore and offshore wells and the reclamation of offshore and onshore facilities. Quatre has successfully applied this solution to other environmentally sensitive sectors, including mining and landfill regeneration.
Current estimates for global decommissioning costs run in excess 200 Billion dollars over the next 50 years, representing an unprecedented capital spend on an activity where operator’s and service providers’ experience is still relatively immature.
The Quatre team includes expertise across the fields of financial services, insurance brokerage, investment management, legal, taxation, trust management, E&P Operations and environmental liabilities.
Study on Mutual Fund is the Better Investment PlanProjects Kart
Mutual funds have become a hot favorite of millions of people all over the world. The driving force of mutual fund is the ‘safety of the principal’ guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. People prefer Mutual Funds to bank deposits, life insurance and even bond because with a little money, they can get into the investment game. One can own string blue chips like ITC, TISCO, Reliance etc., through mutual funds. Thus, mutual funds act as a gateway to enter into big companies hitherto inaccessible to an ordinary investor with his small investment.
The Case For Impact Mezzanine Finance in Emerging MarketsPabloVerra
A primer developed for general partners, limited partners, large and small companies and the general public with an interest in optimizing financial structures in Emerging Markets. The presentation makes the case for general partners to deploy further mezzanine-dedicated funds in developing economies.
Plan Sponsors looking for lower-cost investment vehiclesDan Brennan
The rise of CITs and their broader availability means that plan sponsors should be evaluating these vehicles as part of their due diligence process when selecting investments for their plan lineup. Given the unique features of CITs compared with mutual funds and the different approaches providers take when constructing their products, evaluating these products may take an extra level of due diligence.
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isn’t just any project; it’s a potential game changer for India’s chipmaking aspirations and a boon for investors seeking promising residential projects in dholera sir.
Visit : https://www.avirahi.com/blog/tata-group-dials-taiwan-for-its-chipmaking-ambition-in-gujarats-dholera/
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
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VAT Registration Outlined In UAE: Benefits and Requirementsuae taxgpt
Vat Registration is a legal obligation for businesses meeting the threshold requirement, helping companies avoid fines and ramifications. Contact now!
https://viralsocialtrends.com/vat-registration-outlined-in-uae/
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
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Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
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Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
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1. www.infraquest.co.uk Page 1/5
INFRASTRUCTURE NEDs – WHO NEEDS ‘EM?
Non-executive directors (NEDs) are now common-place in UK listed companies. They are
increasingly prevalent in SMEs. So does this trend extend to the infrastructure sector?
Much of UK infrastructure is privately funded, ultimately by institutional investors. Pension
funds are being encouraged to directly fund more investment. However, the investment
vehicles used to deliver infrastructure projects embody complex financial structures with
unique risk characteristics. So, how are the interests of investors safeguarded and by
whom?
UK corporates and the use of non-executive directors
Over the last decade, UK Corporates have increasingly employed non-executive directors to
provide breadth of experience and objectivity to their boards. In 2003, following high
profile governance abuses such as Enron, the Higgs Report recommended that at least half
the board directors of any company listed on the stock market should be independent non-
executives. This trend has since extended to most SMEs, accentuated by an increasingly
complex and unpredictable business environment and demands for improved governance
standards in the wake of the financial crisis.
The structure of UK infrastructure companies
Much of UK infrastructure is owned by
corporates such as BAA, Centrica and BT
and these conform to the corporate NED
trend. However, according to HM Treasury,
£60bn of UK infrastructure has been
procured over the last two decades through
partnerships with the private sector
(PFI/PPP). These have been delivered by
over 700 project financed joint venture
companies (special purpose companies or
“SPCs”) set-up by private sector sponsor organisations and financial investors. The risks of
financing, constructing and operating these infrastructure projects is borne by the SPCs.
SPC: Severn River Crossing plc
Is there an empty chair on infrastructure company boards?
2. www.infraquest.co.uk Page 2/5
These SPCs arrange funding for, construct and then operate projects from schools and
hospitals, government offices and housing to transportation and energy schemes. The
projects are funded by a combination of equity and debt. They tend to be highly geared
(typically 90% debt funded) using non-recourse debt (i.e., borrowing that is secured on the
future cashflows of the SPCs rather than the balance sheets of the shareholders).
The shares in most of these SPCs
are sold-on to financial investors
once the initial construction risks
have been overcome and the
shares can command a premium
price. These shares are now
owned predominantly by listed or
private equity funds backed by
institutional investors such as
pension funds and insurance
companies.
Owning shares in these SPCs is
not without its risks. The equity,
is subordinated to the senior debt
(i.e., it is the first level of risk
funding). The construction and operation of these assets can be complex. Even an SPC
operating a relatively simple project comprising a few schools can involve significant risks as
the recent news of the closure of 17 PFI schools in Edinburgh shows. So, who is providing
objective oversight of the operation of these SPCs? Are independent NEDs used for this
purpose? If not, should the appointment of NEDs to SPC boards be more widespread?
Board construction in project financed SPCs
Typically, the boards of these SPCs tend to be populated by directors nominated by the
equity parties (including sponsors still involved) from their own staff. They are sector
experts; they understand the market, analysed the risks when they bid or acquired the
project and it is their firms’ investments that are at stake. So are interests aligned?
Well not exactly! Fund managers raise capital from
investors and charge fees on the capital raised or
invested. Sponsor organisations usually have
vested interests in the companies constructing
and/or operating the projects. The debt providers
(banks or project bond holders) who provide most
of the SPC funding have no board representation
relying instead on regular reports by advisers.
Furthermore, most equity nominated directors
hold multiple directorships, often measured in many tens of SPCs. In these circumstances,
ContractOwnership
SPC
SPC
SPC
Infrastructure
Funds
OriginalSponsors
Debt
Government
Service Contract
SPC
SPCInstitutional
Investors
BuildingContract
Operating
Contract
Typical SPC
Structure
SPC: Greater Gabbard OFTO plc
equity (~10%)
(~90%)
3. www.infraquest.co.uk Page 3/5
how rigorous can their governance oversight be and how effectively can they hold SPC
management to account?
When projects fail to perform, the SPCs attract
financial penalties or the contracted payments
for use of the infrastructure are reduced or
stopped. Due to high debt gearing, this can
quickly lead to breaches of lending covenants
resulting in equity payments (dividends and
shareholder loan payments) being ‘locked-up’ or
frozen.
If these circumstances persist, SPCs can need
refinancing. Typically this involves additional equity investment being required. Part of the
debt may be swapped for equity and any project bonds may be downgraded. The result is
investor returns are diluted, lenders assume greater risk and the value of the project is
diminished.
The case for non-executive directors in SPCs
The common purpose of an NED is to:
· bring diversity, wider experience and independent judgement to board decisions
· create a broader perspective in the interests of the company and its stakeholders
· transfer knowledge of a variety of management styles and governance structures
The current modus operandi in SPCs
perpetuates boards dominated by
directors sourced from a narrow
investment banking or transaction
background. Transaction due diligence
may well identify some of the
theoretical risks facing a project.
However, the skills in bidding or
acquiring an investment are quite
different to the practical asset management experience that can help to manage those risks
when they arise.
Homogenous boards typical of these types companies can be ill equipped to deal with the
complex interplay of contractual obligations, regulatory compliance, performance
monitoring and often contradictory demands of clients, shareholders, lenders and other
stakeholder groups. Actual risks tend not to replicate those predicted at a transaction stage
and many SPC directors do not have the pragmatic technical and operational experience to
most effectively guide, question and oversee remedial plans.
Furthermore, despite the number of directorships held by nominated directors, this may not
be their principle role. Many are employed to originate and close future deals for their
SPC: CGL Rail plc (DLR extension)
SPC: Capital Hospitals Ltd (Barts & London Hospital)
4. www.infraquest.co.uk Page 4/5
funds. This is quite consistent with the value line
of their employer and is usually intensive work.
The focus on this priority can undermine how
thoroughly the performance of closed investments
are monitored. Effective oversight is key to
identifying and avoiding risks before they occur
and both time consuming and critical to resolving
them when they do.
It is a dynamic, forward looking SPC management
team with a constructively challenging and
focussed board that most effectively manages risk.
It is also more likely to identify and pursue
opportunities to enhance the value of and returns
from an investment. However, you seldom get one without the other. An experienced and
pro-active board of directors is the precursor to a well-motivated, progressive management
team.
But aren’t these low risk investments?
Historically, an advantage of investment in public infrastructure has been that revenues are
backed by a government covenant or the asset is in a highly regulated environment,
resulting in low volatility in revenues and profits. However, at a time of increasing economic
uncertainty and mounting public sector budgetary constraints, pressure is growing on public
sector clients to find revenue savings or to extract greater value from built assets. This is
driving an increasingly combative approach from some public sector clients. Consequently,
the contractual, operational and financial risks confronting many infrastructure SPCs are
growing.
As these risks mount, so should the time
and attention expended by SPC boards.
Boards can be slow to respond and
reticent in asking for help. By the time
investors have recognised a problem, it
can be too late. Once revenues fail to
sufficiently cover debt payments or contractual disputes arise, shareholder cash flow is
impacted and the time and cost consumed by the executive team increases exponentially.
An independent NED – justifiable cost or unnecessary expense?
So how vulnerable is the structure of many SPC boards and would the appointment of
independent NEDs increase their resilience?
The appointment of a good NED should bring external knowledge and a depth of experience
needed to constructively challenge SPC management. It should also transform the board’s
capability to respond to exceptional risks and/or opportunities. A benefit of such an
appointment should be concise, objective and independent reporting to shareholders,
SPC: Viridor Laing (Greater
Manchester) Ltd (Waste to Energy PFI)
SPC: Connect M1-A1 Ltd
5. www.infraquest.co.uk Page 5/5
providing a clear and unbiased picture of SPC performance and engendering confidence in
future investment returns.
But at what cost and is it worth it? NED costs vary
according to the expertise and experience of the
person and the size and complexity of the SPV. On
an individual company basis, most experienced and
pro-active NEDs can perform the role on the basis of
1-2 days per month (less if board meetings are only
quarterly). This may rise if chairing board sub-
committees or the SPC is suffering some form of
distress. Economies of scale are possible if an
experienced NED is engaged to manage a portfolio of assets for the same investor.
Costs typically range from 5% to 15% of SPC management overheads but with the prospect
of safeguarding exposure to risks costing considerably more. In distressed cases, I have seen
performance restored and equity value rebuilt at a cost of 1.5% - 3.0% of the valuation gain.
Conclusion
The adoption of independent NEDs in project financed infrastructure companies has lagged
behind that of the corporate sector despite investments being exposed to real and
unfamiliar risks. In cases of under-performance, equity investments in these assets are
vulnerable to high levels of
debt gearing which can
quickly trigger a ‘lock-up’ in
shareholder cashflow and
impact investment returns.
Yet investors have been
lulled into a false sense of
security due to historically
low levels of impairment.
However, the investment environment is shifting and the number of assets suffering from
some form of distress is increasing. This is not a time for boards to be populated by
inexperienced nominee directors with priorities elsewhere. Unfortunately, many investors
are unaware of the NED capabilities that exist in the market or how to source them.
About the writer
Nigel Brindley is a turnaround executive and non-executive director currently chairing a
project company in London. With an engineering, construction and operations background,
he has managed infrastructure investments for investment banks, private equity funds and
industrial sponsors for 16 years. By combining financial investor and technical/operational
experiences, he works effectively with management teams whilst aligning the interests of
investors, lenders, contractors and clients in order to secure investment objectives.
nigel.brindley@infraquest.co.uk
SPC: Modern Courts (East Anglia) Ltd
SPC: Modern Schools (Exeter) Ltd